SBI pegs India's Q1 GDP growth at 18.5%
The high growth projection is on account of low base. SBI stated that almost all the countries have registered a double-digit real GDP growth
image for illustrative purpose
Based on SBI Nowcasting model, the forecast on GDP growth for Q1 FY22 would be around 18.5 per cent (with upward bias).
The GVA is estimated at 15 per cent. What is important is the possibility of a wide divergence between GVA and GDP because of encouraging tax collections. This is lower than RBI's expectations of 21.4 percent. If the corporate results announced so far are looked at, a substantial recovery is visible in corporate GVA (EBIDTA + Employee cost) in Q1 FY22. Overall, the corporate GVA of 4,069 companies registered a growth of 28.4 per cent in Q1 FY22. However, this is lower than growth in Q4FY22, thereby corroborating the lower GDP estimate than what was anticipated earlier, says a report by SBI economists.
Higher growth in the second quarter of 2022, or Q1 FY22 is mainly on account of low base. Almost all the countries have registered double-digit (or near to double-digit) real GDP growth. The average real GDP growth for 17 economies has improved from –0.1 per cent in Q12022 to 12.2 per cent in Q2 2022, it adds. Another interesting point is the difference in the perceptions and expectations as revealed by RBI consumer confidence survey. RBI bi-monthly releases Consumer Confidence Survey which tracks perceptions and expectations on general economic situation, employment scenario, overall price situation and own income and spending in 13major cities, viz., Ahmedabad, Bengaluru, Bhopal, Chennai, Delhi,
Guwahati, Hyderabad, Jaipur; Kolkata, Lucknow, Mumbai, Patna and Thiruvananthapuram.
Interestingly the correlation (since Q1 FY19) between the yoy growth of Consumers Future Expectations Index andreal GDP growth, which was highly positive (0.76) till Q4 FY21decelerated sharply to 0.66 if we include the RBI's Q1 GDP growth number. This indicates that there is a disconnect between what the consumers expect and the growth numbers. One of the reasons may be huge base effect which also impacts statistics but not the expectations.
"It is globally noted that lower mobility leads to lower GDP and the higher mobility to higher GDP, but the response is asymmetric. The relationship between the two has become weaker as can be seen in Q1FY22 when mobility has declined, however, GDP growth is high and positive. But higher yoy growth is mainly on account of base effect," SBI group's chief economic advisor, Soumya Kanti Ghosh said.
Meanwhile, business activity index based on ultra-high frequency indicators show further increase in Aug'21 with the latest reading for the week ended Aug 16, 2021, at 103.3. RTO collection, electricity consumption along with the mobility indicators revived in Q2FY22, indicating positive momentum in economic activity going forward.
